The UK’s Financial Conduct Authority (FCA) has opened two consultations on decentralized finance (DeFi) rules and exemptions under its new crypto asset framework, which takes effect in October 2027.
The consultations opened on October 21, 2026, and will accept industry responses until November 18. The FCA expects to publish final guidance in January 2027.
The first consultation, GC26/7, explains how existing financial rules apply to firms that use decentralized protocols or give customers access to them. The FCA says these firms must meet their existing compliance obligations even when they use blockchain technology and smart contracts.
The proposed guidance covers operational resilience, financial crime controls and anti-money laundering requirements. It also explains how firms should manage risks when they provide services through systems without traditional financial intermediaries.
According to the FCA, decentralised services can expose firms and customers to operational failures and financial crime. Rather than creating separate DeFi regulations, the regulator wants to clarify how existing rules apply to these services.
Which Crypto Activities Could Avoid FCA Authorisation?
The second consultation, CP26/36, examines which crypto activities could fall outside authorization requirements under the incoming framework.
Proposed exclusions cover temporary settlement arrangements and the temporary holding of qualifying UK stablecoins during payment transactions. They also include certain arrangements involving assets that back these stablecoins.
In addition, businesses that trade crypto for themselves could qualify for an exclusion if they do not provide services to others. Certain market-making activities on regulated cryptoasset trading platforms may also qualify.
Technical service providers could receive an exclusion when they only help customers access another firm’s services or a decentralized protocol. However, using smart contracts, distributed ledgers or decentralized systems does not automatically exempt a business from regulation.
Instead, the FCA will assess the actual service each business provides to determine whether it requires authorization. The latest proposals build on the regulator’s September guidance on which crypto activities fall within its regulatory scope.
The new framework is scheduled to take effect on October 25, 2027, bringing additional cryptoasset activities under FCA supervision.
Licensing Deadline Brings Flexibility for Some Crypto Firms
The FCA says recent legislative changes have created uncertainty for some businesses preparing authorization applications. Firms affected by the technical services exclusion could receive extra time to complete certain application requirements.
To qualify, businesses must submit an otherwise complete application within the required window. Crypto firms can apply between September 30, 2026, and February 28, 2027.
Eligible applicants may continue providing qualifying crypto services while the FCA reviews their applications. However, submitting an application does not guarantee approval, and existing registration under the Money Laundering Regulations does not automatically grant authorization.
The UK Cryptoasset Business Council has urged the regulator to establish clear boundaries and proportionate compliance requirements. The industry group warns that excessive restrictions could push crypto businesses to move their operations abroad.
